Paul Zrimsek in the comments below offers us this gem:
Last but perhaps not least among causes of the consumer funk is the administration’s own determined pessimism. Mr. Bush has a bully pulpit, and he is using it to preach economic alarm. This adds powerfully to the chorus of doomsaying. And when it comes to short-term economics, believing can sometimes make it so.
Oh snap!
Dude, don't get too excited and wet yourself.
The Bush administration sailed past the “short-term part” of this crsis, when it arguably could have been turned.
We're way past short-term considerations now.
nobody saw this coming, luckily bush got his tax cuts in to hold it off though. and did the dems listen to him when he warned of problems with fannie and freddie “when it arguably could have been turned?”
i´m no guru, but i don´t think the P elosi O bama R eid K rugman style of “fix” is what we really need in the short or long-term.
It gets better!
Replace “Bush” with “Obama” and “tax cut” with “stimulus package” and he's got today's political dynamic to a T.
Tim
Exactly right, except that tax cut won't work and stimulus will. So I am not sure of what your point is.
Oh, it'll work will it. How do you know this?
Most of the “stimulus” is stupid tax cuts. Take a look!
On the surface this about-face looks like political hackery. And maybe it is. But there is at least one distinction between Krugman 2001 and Krugman 2009 that could clear up the contradiction.
Note that in the section of the article that immediately precedes the quoted excerpt, Krugman lays out the case that the 2001 economy wasn't in bad shape. It's clear Krugman thinks this economy is. So assume that Krugman's principle is: “the President should always tell the truth about the economy.” If that's his rule, then he would object to Bush's doomsaying as political scare tactics, and support Obama's current hand-wringing as necessary to public understanding of the problem.
yeah, c'mon, that was 2001. What about our President calling it 'just a rough patch' one year ago? Or McCain saying things were fundamentally sound three months ago? Would that be, 'oh, double snap'?
It's a flesh wound. Come at me, I'll bite your legs off! Coward!
Just by way of history, how many times did Bush repeat “bankruptcy” and “General Motors” together, even while he was passing out _your_ money to them?
How many times did talking-point reading GOPers, from Paulson to Liddy Dole, spook the Agency debt-markets, with their reckless speech?
Frankly, the “gotcha!” of this thread is a welcome relief, no doubt, for those desperate to 'even up the score', because they probably, in sober moments, know just how much behind the eight-ball they are.
You can shout “Fire!” in a crowded movie house in two cases: In the first, there is a fire; in the second, there is no fire.
Shouting “Fire!” is helpful in one of these situations. (And shouting “Calm down, there isn't any fire here!” wouldn't do much good — besides having little effect.)
Hey, _I'm_ ready to call your bluff.
At the beckoning of Libertarians like yourself, let's have nothing. Let's turn off the transfer payments, immediately.
Let's all rely on, what was it ranch-hand George, et. al., came up with? Oh, yeah, “Hope Now Alliance”.
Take the following two posts for example:
From Paul Kedrosky:
“WTO Calls Emergency Meeting on Trade Barriers
barriers This is worrisome:
Just two weeks after saying protectionism was under control, the World Trade Organization is gathering nations in a special meeting Monday to discuss a fast-rising wave of barriers to commerce.
Dozens of measures have been enacted in country after country since early last month, in a scramble by governments to safeguard key industries — often by damaging those of their neighbors.
More here.
From John Carney yesterday:
“Why anyone in the world would feel reassured by listening to Dodd is beyond us. You'd be better off asking your cat if Bank of America would survive. To take just one notorious example, Dodd was talking up the financial health of Fannie Mae and Freddie Mac as late as last summer.
“This is not a time to be panicking about this. These are viable, strong institutions,” Dodd said at a Capitol Hill press conference in July. Two months later the federal government had to take over both of those “strong institutions.”
You today:
“Just two weeks after saying protectionism was under control, the World Trade Organization is gathering nations in a special meeting Monday to discuss a fast-rising wave of barriers to commerce.”
Now, the usual explanation of these farcical reassurances, is that the officials cannot speak the truth, since that would cause a run and decline in stocks or bonds, say. In other words, as officials, their words could effect investing because they might reflect government intervention. This seems like a valid concern.
Similarly, if you read financial reportage, good reporters or commentators tell you if they own the stock or are shorting it, etc. The point being that such comments could influence the market. This is also why the FDIC seems to swoop in before speaking about a takeover.
So, all financial commentary can indeed influence the market and, possibly, the economy. The SEC even has rules about this, I believe. It's not Keynesianism, but common sense.
As for Krugman, he's not a public official or trader. If he speaks as an economist, he's supposed to try and be objective. If he speaks as a political partisan, he's supposed to be up front about what his bias is. It's a system based upon transparency, leaving the reader free to draw his conclusion.
These arrangements have problems. Politicians lie, commentators game, and economists aren't objective, but it's a decent arrangement.
Now, I might be unfair here, but your point seems to be that , if you believe that financial commentary can influence markets in any way, then you should only cheer-lead, in the hopes that you can positively influence the market. That seems wrong. It also seems wrong to not acknowledge that commentary influences the market. As I said, we have a whole set of arrangements to deal with this problem.
As for influencing the economy, you seem to be arguing that, since Shiller believes in behavioral explanations for market movements, and he predicted the housing bubble, it follows that, not only should he not be praised for seeing the problem before others, but he should held in contempt for causing it. Were he God I might credit that, but not otherwise. The point about behavior and economics is much more complex than the idea that one man can cause a crisis. However, if Sheila Bair says the wrong thing, don't you believe that she could cause some problems for the market?
Maybe this guy's correct:
http://www.ft.com/cms/s/0/258c36fc-f483-11dd-8e…
“Lars Nonbye, general manager of the Nonbye sign-making company in Denmark, has found his own way to tackle the global economic slump. He has banned it from work premises. Newspapers are clipped to remove doom-laden articles, talk about the crisis is banned at the start of meetings and anti-crisis stickers are handed to customers. “You have to say, ‘enough is enough’,” maintains Mr Nonbye.
As strategies go, his is arguably as effective as any yet devised by a politician or central banker. This week, the new US administration of President Barack Obama ran into unexpected difficulties over its planned $800bn (£544bn, €624bn) fiscal stimulus, China raised the spectre of mass social unrest by indicating that vast numbers of rural migrant workers would lose their jobs – and European politicians, like their US counterparts, seemed powerless to bring the economy back on to a stable footing.”
Gee, and I thought it was just a post on the undue influence partisanship has on expert opinion.
Tax cuts (sometimes) work. What we've proven, not just with the Bush tax cuts but also the first stimulus (everyone forgets the first stimulus) is that t hey don't (always) work.
It is indeed very dangerous that so much tax cut is in this new stimulus. What was the problem, that there weren't enough shovel-ready projects? Or just not enough politically acceptable projects which would yield to fine-grain congressional control?
Someone (Jim Hamilton?) suggested just dumping money on the states. That would at least ensure a variety of approaches …
Personally I'm resigned to two things: First, the economy is actually worse than stimulus foes like to admit. Second, that we'll get half-a-stimulus and we'll see how that works.
(I am actually a fair libertarian, but centrist enough to think that stimulus is warranted in very special circumstance. I lean toward stimulus now only as far as I believe that we are in fact in a special situation. I think we are, though shouts of “fear mongerer” and “denier” don't shed much light on that.)
Also from the original Krugman piece:
“With one exception, the economic data don't support such gloomy views. The unemployment rate has ticked up slightly, but it is still lower than anyone would have thought possible only a few years ago and in much of the country labor markets remain tight. Business payrolls actually expanded faster from November through January than they did in the previous three months.
Meanwhile, though the growth in consumer spending and business investment has slowed, there has been no collapse. Housing starts are actually up. Manufacturing output did fall sharply in the last few months of 2000, but this was mainly the result of inventory effects: companies produced too much in the face of slowing demand, found that they had accumulated excess inventories, and temporarily slashed production in order to clear their warehouses. Production of most manufactures stabilized last month, and unless demand takes another fall should soon recover.”
In these times – unemployment is spiking, manufacturing output collapsing, credit can't be had, we're looking at an insolvent banking sector ….
As an earlier comment puts it, yelling “Fire!” in a theater that is actually on fire is hardly a crime.
Also from the original Krugman piece:
“With one exception, the economic data don't support such gloomy views. The unemployment rate has ticked up slightly, but it is still lower than anyone would have thought possible only a few years ago and in much of the country labor markets remain tight. Business payrolls actually expanded faster from November through January than they did in the previous three months.
Meanwhile, though the growth in consumer spending and business investment has slowed, there has been no collapse. Housing starts are actually up. Manufacturing output did fall sharply in the last few months of 2000, but this was mainly the result of inventory effects: companies produced too much in the face of slowing demand, found that they had accumulated excess inventories, and temporarily slashed production in order to clear their warehouses. Production of most manufactures stabilized last month, and unless demand takes another fall should soon recover.”
In these times – unemployment is spiking, manufacturing output collapsing, credit can't be had, we're looking at an insolvent banking sector ….
As an earlier comment puts it, yelling “Fire!” in a theater that is actually on fire is hardly a crime.